Uber’s Dystopian Bet

Individual investors will get to buy stock in Uber for the first time next week. What’s the bet they’ll be making?

It’s pretty dark, if you ask me.

A future world in which Uber thrives — it hasn’t yet figured out how to actually make money in our world — would be characterized by three broad accomplishments:

First, it has put its competition out of business. For the quick trips that account for almost 95% of all fares, riding in an Uber is no cheaper than taking a taxi, and can often cost more because of its surge pricing policy. Its app is a more convenient way to hail a ride than hoisting a finger in the air [disclosure: I use it just like you do], but the service it sells isn’t necessarily safer or more reliable.

So the only way it crushes its competition is by outlasting them, which means operating at a loss for the foreseeable future.

If a foreign company followed this strategy, it would be considered dumping and nobody would tolerate it. But since Uber’s mediocre, costly product comes wrapped in flowery language about technology and disruption, it gets a pass.

Second, then it has to replace its human drivers with robots. Even on a good day, Uber will struggle to make a profit as long as it has to pay and incentive drivers; by replacing them on its balance sheet with automatons, it can shift that expense to a CapEx investment (perhaps getting a third-party to underwrite the cost and just lease the service for its service).